SDM Case Report: RMG Concept Ltd, Ghana

RMG Concept Ltd (RMG), is a Swiss company operating in the agricultural sector in West and Central Africa. RMG operates in 17 countries, with physical assets in 7 of those, and with distribution contracts with leading agro-inputs producers and seed companies in many of these countries. RMG has set up a fully vertically integrated business, with its subsidiaries playing various roles in the agricultural value chain. In Ghana, RMG is a leading input (fertilizer, seeds and crop protection) provider and commodity trader.

ALSA Ltd (ALSA), one of RMG’s subsidiaries, runs an outgrower program through which it offers input credit and other services to smallholder farmers. ALSA serves more than 10,000 farmers spanning 5 regions in Northern Ghana. It is currently looking to expand its input credit portfolio of GHS 21M to GHS 164M, reaching over 22,000 smallholder farmers by 2025. Although most of its agriculture portfolio is in maize (about 70%), ALSA Ltd is also growing its offerings in their other value chains – rice, cotton and soybean.

This SDM analysis explored how ALSA can sustainably scale up its service delivery model in a cost-efficient and effective way . The analysis shows that:

• ALSA’s business model is very credit-intensive as it relies heavily on pre-financing (of inputs and to a degree of produce). It can survive because it has access to affordable credit from the RMG Group, but it’s growth is limited without raising credit through conventional financial service providers (FSPs). Conventional FSPs are currently not eager to provide the required financing at affordable rates due to the perceived high risk of farmer lending. Therefore, ALSA will benefit from a financing structure with a third party that can de-risk the business model and thus pull the local FSP’s over the line, and
• ALSA’s business model is successful for farmers because it puts farmers in a position to grow their income 3-fold by increasing their maize productivity without negatively affecting their cash flow. High quality products in combination with GAP will increase a farmer’s productivity enough to make it worthwhile to increase their land size, thereby significantly increasing their net income. ALSA’s guaranteed off-take of the produce also strengthens the security of the farmer.